Snead v. Comm'r

T.C. Summary Opinion 2008-57

UNITED STATES TAX COURT

MILTON CHRISTOPHER SNEAD, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3213-06S. Filed May 21, 2008.

Milton Christopher Snead, Jr., pro se.

Bradley C. Plovan, for respondent.

GOLDBERG, Special Trial Judge: This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed. Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case. Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
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the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

Respondent determined a deficiency of $4,970 in petitioner’s

2003 Federal income tax and an accuracy-related penalty of $994

under section 6662(a). The issues for decision are whether

petitioner is entitled to itemized deductions in an amount

greater than the standard deduction allowed by respondent and

whether petitioner is liable for the accuracy-related penalty

under section 6662(a).

Background

Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time the petition

was filed, petitioner resided in Maryland.

In 2003 petitioner was single and had a minor daughter.

Petitioner timely filed a 2003 Federal income tax return.

Petitioner was employed as a sergeant for the Baltimore City

Police Department, Western District (the department). Petitioner

was required to wear a police uniform. The department provided

petitioner one uniform jacket, three pairs of pants, three

shirts, a hat, and a sweater. Each week petitioner paid

approximately $20 to have two of his uniforms dry cleaned. The

department required petitioner to come to work in a clean,

pressed uniform and black shoes. The department did not provide
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the shoes. Petitioner bought black Nike boots, and he purchased

new boots whenever the old boots wore out. Petitioner purchased

three pairs of boots in 2003 at a cost of approximately $100 per

pair. The department did not reimburse petitioner for his dry

cleaning expenses or for the cost of boots. The department does

not reimburse petitioner for any dry cleaning or personal

equipment purchased to perform police duties.

The department issued petitioner a weapon, ammunition, and

four boxes of practice ammunition each year. In 2003 petitioner

purchased 10 additional boxes of ammunition for target practice.

Petitioner was able to purchase ammunition at the district range

at a cost of $6.50 per box. Petitioner practiced shooting at the

district range, which was free for employees. Petitioner also

practiced shooting at other ranges, where he paid approximately

$7 per half hour and $15 for each box of ammunition. In 2003

petitioner practiced shooting at the other ranges approximately

five times and used two boxes of ammunition during each visit.

The department did not reimburse petitioner for any costs

incurred at the other ranges.

Petitioner drove his personal automobile to work each day.

At times he was required to appear in court, and on those days he

drove as part of his employment as a police officer. On the days

he went to court, petitioner drove his personal automobile from

home to court. Petitioner paid for parking while at the circuit
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court and Federal court. Petitioner estimated that his parking

expenses were $25 per week.

During tax year 2003 petitioner placed used clothing in a

yellow bin on the side of the road. Petitioner believed the bin

was a repository for charitable donations, but he could not

recall the name of the charity. Petitioner estimated the total

cost of the clothing he placed in the bin was $120. Petitioner

occasionally attended church services.1

The department provided free medical care to officers who

were injured in the line of duty. Additionally, petitioner was

enrolled in a health insurance plan with Blue Cross/Blue Shield.

Petitioner’s daughter was also covered by this health insurance

policy, with a copayment of approximately $10 for medication. In

2003 all of petitioner’s medical and dental expenses were

covered by his health insurance policy. There is no evidence

that petitioner paid any copayments for his daughter in 2003.

Upon the advice of a coworker, petitioner engaged a return

preparer to prepare his income tax return for 2003. Petitioner

met with the preparer to have the return completed. When the

preparer learned that petitioner was a police officer, the

preparer asked petitioner a series of questions regarding

petitioner’s job expenses, noncash charitable contributions, and

1
The record does not reflect how often or in what amounts
petitioner made contributions while attending church.
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medical and dental expenses for tax year 2003. The preparer

entered on the return amounts based on petitioner’s answers.

Petitioner did not give the preparer any bills or receipts. The

preparer showed the completed return to petitioner and discussed

the entries. Petitioner did not question the preparer or ask the

preparer to explain any of the entries on the return. Petitioner

and the preparer each signed the return. On Schedule A, Itemized

Deductions, petitioner claimed deductions totaling $26,829

comprising $13,737 in unreimbursed job-related expenses, $6,545

of charitable contributions, $3,023 of medical and dental

expenses, and $3,494 of State and local income taxes.

Respondent issued petitioner a notice of deficiency in

November 2005 disallowing all of the claimed itemized deductions.

The notice of deficiency allowed petitioner a standard deduction

of $4,750.2 Respondent also determined an accuracy-related

penalty under section 6662(a). Petitioner filed a timely

petition for redetermination.

Discussion

In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error. Rule

2
To the extent the Court concludes that petitioner is
entitled to some itemized deductions, but the amount is less than
the standard deduction allowed by respondent, the Court will
sustain respondent’s determination.
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142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions

are a matter of legislative grace, and the taxpayer bears the

burden of proving entitlement to any deduction claimed on a

return. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992);

Wilson v. Commissioner, T.C. Memo. 2001-139.

Pursuant to section 7491(a), the burden of proof as to

factual matters shifts to the Commissioner under certain

circumstances. Petitioner has neither alleged that section

7491(a) applies nor established his compliance with the

requirements of section 7491(a)(2)(A) and (B) to substantiate

items, maintain records, and cooperate fully with respondent’s

reasonable requests. Petitioner therefore bears the burden of

proof.

We iterate that petitioner produced no receipts or

documentation for any of the itemized deductions claimed.

Respondent disallowed the claimed deductions in full because

petitioner did not establish that the expenses were paid during

tax year 2003 or that the deductions were for ordinary and

necessary business expenses.

Job-Related Expenses

Section 162(a) allows a deduction for all ordinary and

necessary expenses incurred during the taxable year in carrying

on a trade or business. Generally, the performance of services

as an employee constitutes a trade or business. Primuth v.
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Commissioner, 54 T.C. 374, 377 (1970). A taxpayer must maintain

records sufficient to substantiate the amounts of the deductions

claimed. Sec. 1.6001-1(a), Income Tax Regs. For such expenses

to be deductible, the taxpayer must not have the right to obtain

reimbursement from his employer. See Orvis v. Commissioner, 788

F.2d 1406, 1408 (9th Cir. 1986), affg. T.C. Memo. 1984-533.

On his 2003 Federal income tax return, petitioner claimed a

net deduction of $13,767 for employee and other miscellaneous

expenses. At trial petitioner maintained that he is entitled to

deductions for the following expenses: (1) Dry cleaning his

uniforms and purchasing boots; (2) ammunition and target range

fees; and (3) business use of his automobile, including gasoline

and parking.

A. Uniform Dry Cleaning and Boots

Petitioner claimed a business expense deduction for the cost

of dry cleaning his uniforms and for the cost of black boots.

The cost to purchase and maintain work clothing and shoes may be

deductible under section 162 if the taxpayer can establish that:

(1) The clothing is required or essential in the taxpayer’s

employment; (2) the clothing is not suitable for general or

personal wear; and (3) the clothing is not worn for general or

personal purposes. Yeomans v. Commissioner, 30 T.C. 757, 767-769

(1958); Kozera v. Commissioner, T.C. Memo. 1986-604.
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With respect to the uniform dry cleaning, respondent does

not dispute that petitioner has satisfied the legal requirements

for deductibility. However, respondent denied the deduction for

lack of substantiation. When a taxpayer adequately establishes

that he paid or incurred a deductible expense but does not

establish the precise amount, the Court may in some circumstances

estimate the allowable deduction, bearing heavily against the

taxpayer whose inexactitude is of his own making. Cohan v.

Commissioner, 39 F.2d 540, 544 (2d Cir. 1930). Petitioner

testified that he paid $20 a week to dry clean two uniforms.

Although petitioner did not present receipts, the Court found

petitioner’s testimony to be credible with respect to the

cleaning expense and its business purpose. Thus, the Court will

allow petitioner a deduction for his dry cleaning expenses, at

$20 a week for 50 weeks, or $1,000.

The department also required petitioner to wear black

footwear as part of his uniform. The record does not indicate

that petitioner’s black Nike boots were not suitable for general

or personal wear or that petitioner wore the boots only at work.

No deduction is allowed for personal, living, or family expenses.

Sec. 262(a). We find that petitioner’s boots are a personal

expense and conclude that he is not entitled to a deduction for

the cost of boots. See Hynes v. Commissioner, 74 T.C. 1266, 1291

(1980).
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B. Ammunition and Target Range Expenses

Petitioner claimed deductions for the cost of ammunition and

for target range fees. Petitioner was required to maintain a

certain skill level with his weapon. Petitioner could have used

the district gun range at no cost, but he sometimes practiced at

private practice ranges. Petitioner failed to explain why he

chose to spend money at a private range when he could use a

district gun range for free. Petitioner is not entitled to a

deduction for fees paid to private target ranges since he has not

established that the expense is ordinary and necessary.

The Court is satisfied that petitioner was required to

purchase ammunition as part of his employment as a police

officer. Although petitioner failed to provide details as to the

exact amount of this expenditure, the Court will allow petitioner

$65 for this item.3 See Cohan v. Commissioner, supra.

C. Automobile Expenses

Petitioner claimed a deduction for the business use of his

automobile, including gasoline and parking. Petitioner incurred

expenses for gasoline when he drove from his home to work and

from his home to court. Expenses relating to the use of an

automobile while commuting between the taxpayer’s residence and

3
Petitioner estimated that he purchased 10 boxes of
ammunition and fired 2 boxes on each of five trips to the range
in 2003. At $6.50 per box (the cost to purchase ammunition from
the department), this amounts to $65.
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the taxpayer’s place of business or employment are not deductible

because they are personal and not business expenses. Secs. 162,

262(a); Fausner v. Commissioner, 413 U.S. 838 (1973);

Commissioner v. Flowers, 326 U.S. 465 (1946); secs. 1.162-2(e),

1.262-1(b)(5), Income Tax Regs. Since petitioner incurred the

claimed expenses while commuting between his home and work and

between his home and court, they are personal expenses.

Therefore, petitioner is not entitled to a deduction for the use

of his automobile or for the cost of gasoline.

Petitioner also claimed a deduction for parking expenses

incurred when he appeared in court and had to park his automobile

at a meter or in a parking garage. Even if petitioner

established that the cost of the parking is a properly deductible

expense, section 274(d)(4) requires a taxpayer to substantiate:

(A) The amount of the vehicle expense; (B) the time and place of

the use of the vehicle; (C) the business purpose of the expense;

and (D) the business relationship of the vehicle use to the

taxpayer. Petitioner did not provide any evidence to support the

claimed parking expenses. Petitioner did not provide any dates

or times of his court appearances, nor did he provide any

receipts or other evidence that might have corroborated his oral

testimony. Thus, petitioner may not deduct parking expenses.
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Charitable Contributions

In general, section 170(a) allows a deduction for any

charitable contribution made within the taxable year. A

charitable contribution, whether made by cash or otherwise, must

be substantiated by at least one of the following: (1) A

canceled check; (2) a receipt from the donee charitable

organization showing the name of the donee, the date of the

contribution, and the amount of the contribution; or (3) in the

absence of a canceled check or a receipt from the donee

charitable organization, other reliable written records showing

the name of the donee, the date of contribution, and the amount

of the contribution. Sec. 1.170A-13(a)(1), Income Tax Regs.

On his 2003 tax return petitioner claimed a deduction of

$4,995 for cash charitable contributions and $1,550 for noncash

charitable contributions, all of which respondent disallowed.

Petitioner provided no support for any of the cash

charitable contribution deduction of $4,995. Respondent’s

determination on this issue is sustained.

At trial petitioner stated that he donated used clothing by

depositing it into a charity bin. On his 2003 tax return

petitioner claimed a $1,550 deduction for the clothing donated.

At trial petitioner estimated the cost of the used clothing at

$120 but provided no substantiation. In the light of

petitioner’s inflated claim and the lack of evidence supporting
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any donation, no deduction is allowed for noncash charitable

contributions. Respondent’s determination on this issue is

sustained.

Medical and Dental Expenses

Section 213(a) allows a deduction for medical and dental

expenses of a taxpayer or dependent (as defined in section 152)

that were paid and not compensated for by insurance, to the

extent the expenses exceed 7.5 percent of the taxpayer’s adjusted

gross income. Medical care expenses include amounts paid for

insurance premiums. Sec. 213(d)(1)(D).

Petitioner reported he spent $6,985 for medical and dental

expenses, and he claimed a deduction of $3,023, after the 7.5-

percent limitation, which respondent disallowed. Petitioner

acknowledged that he had no uncompensated medical expenses in

2003. Further, petitioner is not claiming his daughter as his

dependent, nor is he claiming that she incurred any uncompensated

medical expenses in 2003. Therefore, petitioner is not entitled

to a deduction for medical and dental expenses. Respondent’s

determination on this issue is sustained.

State and Local Taxes

Petitioner claimed a $3,494 deduction for State and local

taxes. It is obvious to the Court that this was the amount

reported on petitioner’s Form W-2, Wage and Tax Statement, as was

the amount of his total income, $52,832. Therefore, petitioner
 - 13 -

is entitled to a $3,494 deduction for State and local taxes in

2003. See sec. 164(a)(3).

Standard Deduction

The standard deduction respondent allowed in the notice of

deficiency for 2003 was $4,750. Petitioner’s claimed deductions

for uniform dry cleaning, ammunition, and State and local income

taxes as allowed by this opinion total $4,559 and do not exceed

the standard deduction amount. Petitioner is therefore entitled

to the standard deduction. See sec. 63(b) and (c); Shepherd v.

Commissioner, T.C. Memo. 1999-19. Respondent’s determination in

the notice of deficiency is sustained in full.

Accuracy-Related Penalty Under Section 6662(a)

Under section 7491(c) the Commissioner bears the burden of

production with regard to penalties and must come forward with

sufficient evidence indicating that it is appropriate to impose

the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

However, once the Commissioner has met the burden of production,

the burden of proof remains with the taxpayer, including the

burden of proving that the penalty is inappropriate because of

reasonable cause or substantial authority. Rule 142(a); Higbee

v. Commissioner, supra at 446-447.

Section 6662(a) imposes a penalty of 20 percent of the

portion of the underpayment of tax attributable to the taxpayer’s
 - 14 -

negligence, disregard of rules or regulations, or substantial

understatement of income tax. Sec. 6662(a) and (b)(1) and (2).

A substantial understatement is an understatement of income

tax for any taxable year which exceeds the greater of (a) 10

percent of the tax required to be shown on the return, or (b)

$5,000. Sec. 6662(d)(1). Petitioner’s understatement is $4,970;

thus, respondent has not met his burden of production with

respect to a substantial understatement under section 6662(b)(2)

and (d)(1).4

Negligence includes the failure to exercise due care or do

what a reasonable and ordinarily prudent person would do under

the circumstances. Allen v. Commissioner, 925 F.2d 348, 353 (9th

Cir. 1991), affg. 92 T.C. 1 (1989); Neely v. Commissioner, 85

T.C. 934, 947 (1985). Furthermore, negligence is strongly

indicated where “A taxpayer fails to make a reasonable attempt to

ascertain the correctness of a deduction, credit or exclusion on

a return which would seem to a reasonable and prudent person to

4
In his trial memorandum respondent asserts that
petitioner understated the tax by more than 10 percent and
therefore sec. 6662(d)(1) applies. The tax required to be shown
on the return is $8,066 and the amount shown on the return is
$3,096. While no doubt the understatement exceeds 10 percent,
the penalty applies only if the understatement exceeds the
greater of 10 percent or $5,000. Here, the understatement does
not exceed $5,000; accordingly, sec. 6662(b)(2) and (d)(1)(A)
does not apply. Since the Court concludes that petitioner was
negligent under sec. 6662(b)(1) and (c), respondent’s erroneous
assertion does not alter our conclusions herein.
 - 15 -

be ‘too good to be true’ under the circumstances”. Sec. 1.6662-

3(b)(1), Income Tax Regs.

Petitioner contends that he is not liable for the penalty

because he relied on erroneous expert advice given by his tax

preparer. However, petitioner did not take reasonable steps to

report the correct tax liability. Petitioner did not provide the

preparer with any documents or receipts to substantiate any of

his claimed deductions, nor did he scrutinize any of the figures

that the preparer reported on the return. Further, petitioner

failed to question any of the inflated figures. Thus, petitioner

did not exercise the due care of a reasonable and ordinarily

prudent person. The understatement is due to negligence within

the meaning of section 6662(c), and petitioner is liable for the

accuracy-related penalty under section 6662(a). Respondent’s

determination on this issue is sustained.

To reflect the foregoing,

Decision will be entered

for respondent.